It looks all but certain that the Fed will continue to slowly raise the federal funds rate. While the federal funds rate doesn't directly impact commercial real estate interest rates, it's hard to foresee a scenario where commercial real estate interest rates do not rise in the intermediate term. Before this latest announcement from the Fed, Fitch Ratings estimated that 35% of CMBS debt maturing by year-end 2023 will not be re-financeable at current interest rates given the property's current values. With lenders facing the potential of further losses from defaults on their commercial mortgages they are likely to pull back from lending in the coming months risking a credit crunch.
If that happens, new development will further slow and owners with maturing debt may face the unpleasant choice of making a capital call to deleverage their asset or handing the keys back to the lender.
